In the coming days, the House and Senate will take a critical up-or-down vote on historic health insurance reforms. Tied to them will be the most significant reform of our federal student loan program in a generation. It will make college aid more effective and cost-efficient for families and taxpayers without increasing the deficit. Congress should support both measures.
The case for fixing today’s backward student loan system is simple: According to the Congressional Budget Office, the federal government is wasting $67 billion on subsidies to banks. President Obama and lawmakers, including some Republicans, believe these dollars could be better spent directly helping families pay for college.
Not surprisingly, banks are waging a ferocious battle to save their sweetheart deal by playing fast and loose with the truth. If they succeed, they will put at risk tens of billions of dollars that we would use to increase Pell Grants for students, boost college graduation rates and reduce borrowers’ monthly student loan payments.
It’s time to set the record straight.
Our bill is good for taxpayers. It would eliminate these needless subsidies and instead have the government initiate student loans, as it does today, and private banks service them. Consider that the government now funds 88 percent of all federal student loan volume. There’s simply no reason to keep giving banks a handout.
Our bill is good for students. The federal government has already proved to be a more reliable lender for students in the midst of economic instability. All of the savings generated from switching to direct lending will go to help students pay for college and reduce our deficit.
Our bill is good for jobs. It would preserve private-sector jobs by allowing banks to compete for loan servicing contracts – and could even bring overseas jobs back home. Unlike loans made by banks, direct government loans must be serviced by U.S. workers.
The notion of ending this sweetheart deal is far from radical. Presidents from both parties, including Bill Clinton and George W. Bush, have long identified these subsidies as problematic. To his credit, President Bush proposed trimming subsidies in 2005, 2006 and 2008.
It would also be wrong to suggest that student loan reform is being talked about at the 11th hour. Last year’s House budget resolution instructed Congress to use majority rule to enact health and student loan reforms that generate at least $1 billion in savings over five years. The idea of joining these bills has been publicly discussed for months since.
In fact, both Republicans and Democrats have a history of using majority rule for similar reforms. In 2005, Republicans used reconciliation to cut $12 billion from banks’ subsidies – but to finance tax breaks for the wealthy. In 2007, Democrats used reconciliation to reduce subsidies by $20 billion – but used the savings to help students. One hundred Republicans supported us.
Health reform and student loan reform share many things in common – and combining the two measures will help both pass Congress. Voting to put students before banks is an increasingly popular prospect, especially as students around the country protest devastating tuition hikes.
Everyone says they want to change how Washington works. We face a rare moment in history when we can do just that. Congress can do the right thing by fixing two broken systems that are bankrupting American families – or they continue rewarding insurance companies and banks.
Rep. George Miller, D-Martinez, is the chairman of the House Education and Labor Committee and the author of both the health insurance l and the student loan reform bills Congress will consider this week.